Vari-L Company Announces Second Quarter and Six-Month Results for Fiscal 2002
DENVER, Feb. 12 /PRNewswire-FirstCall/ -- Vari-L Company, Inc. (OTC: VARL - news), a leading provider of advanced components for the wireless telecommunications industry, today announced results for its fiscal 2002 second quarter and six-month period ended December 31, 2001.
The Company also announced it will conduct a conference call on Tuesday, Feb. 12, at 2:30 p.m. Mountain Time. The call-in number is 1-800-366-7449. The conference I.D. is 446592. The call will also be broadcast over the Internet at videonewswire.com . To listen to the live call, please go to the web site 15 minutes early to register and download any necessary audio software. A replay will be made available shortly after the call at www.prnewswire.com .
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 2001
COMPARED WITH THE THREE MONTHS ENDED DECEMBER 31, 2000
Net sales for the three months ended December 31, 2001 were $5.6 million, compared with $10.9 million for the three months ended December 31, 2000. This decline is primarily due to a decrease in demand for commercial signal source products consistent with an overall slowdown in the wireless telecommunications industry. Revenue from commercial signal source products was $4.4 million for the three months ended December 31, 2001, versus $9.3 million for the three months ended December 31, 2000. Revenue from all other products was $1.2 million for the second quarter compared with $1.6 million for the second quarter ended December 31, 2000.
Gross profit for the three months ended December 31, 2001 was $2.3 million, or 41.4 percent of net sales, compared with $5.2 million, or 47.6 percent of net sales, for the three months ended December 31, 2000. The gross profit percent in any period can be affected significantly by volume and unusual items.
Fixed manufacturing overhead adversely affects gross profit at lower sales volumes. Accordingly, the reduced sales level for the three months ended December 31, 2001 had the effect of lowering gross profit as a percentage of sales. In prior years, we sometimes increased our inventory of certain parts used in our products to reduce the risk of part shortages. However, this strategy has exposed us to the countervailing risk of accumulating excess inventory. In June 2001, we hired a director of materials management to minimize the risk of excess and obsolete inventory. The director of materials management has introduced new procurement processes that minimize future purchase commitments in excess of our firm order demand, although parts previously identified as excess inventory continue to exist. On a quarterly basis, we review our inventory on hand and firm purchase commitments versus our sales forecast to determine the adequacy of the existing reserve for excess and obsolete inventory.
Included in cost of goods sold for the three months ended December 31, 2001 and 2000 are charges of $66,000 and $340,000, respectively, for excess and obsolete inventory. Additionally, for the three months ended December 31, 2001, we charged $65,000 to cost of goods sold for severance costs related to a reduction in our work force. These charges were offset by $268,000 of recoveries for previously written-off inventory.
Total operating expenses, exclusive of expenses relating to the accounting restatements and related shareholder litigation, non-cash stock compensation, and the benefit of insurance recoveries, decreased $1.1 million for the quarter ended December 31, 2001 compared with the comparable quarter in 2000. Through aggressive cost containment efforts and with the benefit of the insurance recoveries and a $117,000 benefit from a change in the amount of a previously estimated liability which was settled at less than the original estimated amount, total operating expenses were $2.8 million for the three months ended December 31, 2001, compared with $5.0 million for the three months ended December 31, 2000.
The net loss for the three months ended December 31, 2001 was $528,000, or $0.07 per share. Excluding the $13,000 impact of stock compensation, which is a non-cash charge, the benefit of $51,000 relating to accounting restatements and the related shareholder litigation (which management believes are not indicative of continuing operating expenses) and $101,000 severance costs associated with the reduction in our workforce, offset by the benefit of the $268,000 inventory recovery and the $145,000 insurance recovery for undocumented travel advances, net loss would have been $878,000, or $0.12 per share.
For the three months ended December 31, 2000, the net loss was $10,000, or less than $0.01 per share. Excluding the $235,000 impact of stock compensation, which is a non-cash charge, and expenses of $620,000 relating to accounting restatements (which management believes are not indicative of continuing operating expenses) net income for the three months ended December 31, 2000 would have been $845,000, or $0.12 per share.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2001 COMPARED
WITH THE SIX MONTHS ENDED DECEMBER 31, 2000
Net sales for the six months ended December 31, 2001 were $11.3 million compared with $22.4 million for the six months ended December 31, 2000. This decline is primarily due to a decrease in demand for commercial signal source products consistent with an overall slowdown in the wireless telecommunications industry. Revenue from commercial signal source products was $8.7 million for the six months ended December 31, 2001, versus $18.7 million for the six months ended December 31, 2000. Revenue from all other products was $2.6 million for the six months ended December 31, 2001, compared with $3.7 million for the six months ended December 31, 2000. Revenue for the six months ended December 31, 2000 included a significant end-of-life production run generating net sales of approximately $0.8 million.
Gross profit for the six months ended December 31, 2001 was $4.5 million, or 39.6 percent of net sales, compared with $10.5 million, or 47.1 percent of net sales, for the six months ended December 31, 2000. As previously stated, the gross profit percent in any period can be affected significantly by volume and unusual items and the related impact on the adequacy of reserves for excess and obsolete inventory.
Included in cost of goods sold for the six months ended December 31, 2001 and 2000 are charges of $122,000 and $886,000, respectively, for excess and obsolete inventory. Additionally, for the six months ended December 31, 2001, we charged $65,000 to cost of goods sold for severance costs related to a reduction in our work force. These charges were offset by $268,000 of recoveries for previously written-off inventory.
Total operating expenses, exclusive of expenses relating to the accounting restatements and related shareholder litigation, non-cash stock compensation, and the benefit of insurance recoveries, decreased $1.9 million for the six months ended December 31, 2001 compared with the comparable period in 2000. Through aggressive cost containment efforts and with the benefit of the insurance recovery and a $117,000 benefit from the adjustment of a previous estimated liability, total operating expenses were $6.0 million for the six months ended December 31, 2001, compared with $10.4 million for the six months ended December 30, 2000.
The net loss for the six months ended December 31, 2001 was $1.6 million, or $0.23 per share. Excluding the $27,000 impact of stock compensation, which is a non-cash charge, expenses of $34,000 relating to accounting restatements and the related shareholder litigation (which management believes are not indicative of continuing operating expenses) and $101,000 severance costs associated with the reduction in our workforce, offset by the benefit of the $268,000 inventory recovery and the $145,000 insurance recovery for undocumented travel advances, net loss would have been $1.9 million, or $0.27 per share.
For the six months ended December 31, 2000, the net loss was $211,000, or $0.03 per share. Excluding the $445,000 impact of stock compensation, which is a non-cash charge, and expenses of $1,868,000 relating to accounting restatements (which management believes are not indicative of continuing operating expenses) net income for the six months ended December 31, 2000 would have been $2.1 million, or $0.30 per share (basic and diluted).
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2001, working capital was $6.3 million, including cash and cash equivalents of $1.6 million. Working capital at June 30, 2001 was $7.1 million, including cash and cash equivalents of $2.0 million. Operating activities generated $238,000 of cash, largely from the reduction of accounts receivable through collections and lower sales volumes in the quarter. Additionally, we continued our focus on reducing inventory levels and increasing inventory turns. The cash generated from these efforts was partially offset by the net loss, adjusted for non-cash charges, the payment of annual bonuses to employees and reduced accounts payable due to lower costs and expenses attributable to lower sales volumes.
Capital expenditures for the six months ended December 31, 2001 were $442,000. We focused capital expenditures primarily on information technology hardware and software.
We reduced our notes payable and long-term obligations by $0.3 million as of December 31, 2001 as compared to June 30, 2001. Our new credit facility under Wells Fargo Business Credit, Inc. allows us to borrow and re-pay our obligations based upon our cash flow needs at any time subject to maximum loan amounts as determined by a calculated borrowing base.
Rick Dutkiewicz, vice president finance and CFO, said Vari-L regularly reviews the state of the wireless industry as it relates to the Company's internal financial projections and periodically engages in discussions with Wells Fargo Business Credit, Inc. on both historic and projected financial performance. Based on this process, the Company recently revised its financial projections for the remainder of fiscal 2002 and negotiated revised covenants with Wells Fargo Business Credit that are in line with those projections.
Chuck Bland, president and CEO, said, ``Despite continued effects of a downturn in the wireless industry, net sales remained relatively stable compared with the first quarter, and we continued to make progress in reducing our cost structure and controlling litigation-related expenses.'' He added, ``It remains unclear as to when the expected turnaround in the wireless industry will begin. However, with the acquisition and development of new technology and the addition of highly skilled engineering talent, we are developing innovative new products and positioning the Company to take advantage of the inevitable upturn.''
Bland noted several other highlights that occurred during and subsequent to the second quarter:
Vari-L strengthened its Board of Directors with the addition of two outside and one inside directors. David M. Risley joined the Board in November. Currently a senior vice president and chief financial officer with NYSE-listed La-Z-Boy, Risley brings 30 years of diversified finance and business experience. In addition, Charles Bland joined the Board in December and Robert Dixon joined the Board in January. Dixon brings 46 years of experience as a senior scientist and development engineer with some of the world's leading defense, communications and electronics organizations, including Omnipoint, Northrop, Hughes Aircraft, Magnavox and TRW.
Also in January, the Company announced the acquisition of certain assets of Asvan Technology, LLC's YIG technology which forms the foundation for a new line of Vari-L products that address key emerging wideband and higher-frequency applications. Specifically, the Company is developing YIG-enabled oscillators and synthesizers notable for their improved phase noise and price performance advantages. In addition to the planned YIG-based products, the Company expects to roll out two new component product families in the third quarter of fiscal 2002.
Headquartered in Denver, Vari-L designs, manufactures and markets wireless communications components that generate or process radio frequency (RF) and microwave frequency signals. Vari-L's patented products are used in commercial infrastructure equipment (including GSM/cellular/PCS base stations and repeaters, fixed terminal point to point/multi-point,) consumer subscriber products (advanced cellular/PCS/satellite handsets), and military/aerospace platforms (satellite communications/telemetry, missile guidance, electronic warfare, electronic countermeasures, battlefield communications). Vari-L serves a diverse customer base of the world's leading technology companies, including Agilent Technologies, Ericsson, Harris, Hughes Network Systems, Lockheed Martin, Lucent Technologies, Microwave Data Systems, Marconi, Motorola, Netro, Nokia, Raytheon, Textron, Siemens, and Solectron.
Some of the statements we make in this news release are ``forward-looking statements'' as that term is used in the Private Securities Litigation Reform Act of 1995. In most cases, when we use words like ``believe,'' ``expect,'' ``estimate,'' ``anticipate,'' ``project,'' or ``plan'' to describe something which has not yet occurred, we are making a forward-looking statement. Forward-looking statements we make are based on a number of assumptions by us about the future, usually based on current conditions or on the broader expectations of others. These assumptions may or may not prove to be correct and, as a result, our own forward-looking statements may also be inaccurate. On the other hand, based on what we know today and what we expect in the future, we believe that the forward-looking statements we make in this news release are reasonable.
We cannot list here all of the risks and uncertainties that could cause our plans for the future to differ materially from our present expectations but we can identify many of them. For example, we may be affected by the overall market for various types of wireless communications products, the success of the specific products into which our products are integrated, governmental action relating to wireless communications, licensing and regulation and the timeliness and relative success of the resolution of pending and threatened litigation. It is also important to remember that forward-looking statements speak only as of the date when they are made and we do not promise that we will publicly update or revise those statements whenever conditions change or future events occur. Accordingly, we do not recommend that any person seeking to evaluate our company should place undue reliance on any forward-looking statement in this news release. |
